Correcting the Corrections announcement – a fiscal farce that should bother the OECD
One headline-grabber from the Beehive yesterday was the OECD’s advice that the government must bring the Budget deficit under control or face higher interest rates.
Another was the announcement of a $1.9 billion “investment” in Corrections over the next four years.
In the best interests of keeping us safe – we were told – the $1.9bn would be invested in more frontline Corrections officers, more support for offenders to turn away from crime, and more prison capacity.
But if we are to believe media accounts of what transpired at the announcement, the PM and his trusty Corrections Minister, Mark Mitchell, struggled with their numbers and had a feeble grasp of how much of the $1.9 bn is capital investment and how much is government spending of the sort that is troubling the OECD.
We suggest readers exercise an element of scepticism as they study the press release which can be found among the …
But if we are to believe media accounts of what transpired at the announcement, the PM and his trusty Corrections Minister, Mark Mitchell, struggled with their numbers and had a feeble grasp of how much of the $1.9 bn is capital investment and how much is government spending of the sort that is troubling the OECD.
We suggest readers exercise an element of scepticism as they study the press release which can be found among the …
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New Zealanders will be safer because of a $1.9 billion investment in more frontline Corrections officers, more support for offenders to turn away from crime, and more prison capacity.
One account of the Corrections press conference comes from RNZ:
In a convoluted media conference, the Prime Minister and Corrections Minister repeatedly provided incorrect information about their planned prison spend-up.
And:
The near 40-minute media conference raised almost more questions than answers – with Christopher Luxon and Mark Mitchell at times contradicting each other.
Both claimed some of the money would go towards an 810-bed extension to Waikeria prison – but then said that figure included 600 beds already funded and previously announced by Labour.
During the press conference Mitchell could not say how much the 810 beds would cost, other than to say it costs $120,000 per year to house and feed a prisoner.
From very early on they were asked if the 810 beds were in addition to the 600 already being built at Waikeria, to which Luxon nodded.
Mitchell then jumped in and said: “No no, so that’s in addition. At Waikeria we’ll have 600 beds that will come online at the middle of next year and then there will be an additional 220 beds that will come on with the new wing.”
He then corrected the 220 to 210 beds.
“This is budgeted inside the $1.9b,” he said.
Someone put it to the PM and his Minister that only 200 new beds were being built, not 800 as they had suggested in their press release
Not so, both Luxon and Mitchell insisted.
But that was where the clarity ended with Mitchell then saying there will be 810 beds in total at Waikeria. That immediately put in doubt their earlier remarks that the 810 beds were in addition to 600 already budgeted by Labour and under construction.
Adding more confusion to the situation, Mitchell said: “Waikeria hasn’t been delivered, Waikeria will be delivered in the middle of next year.”
RNZ reports that Waikeria does already exist as a prison and currently has capacity for 455 prisoners. The new 600 beds coming online next year are a separate facility at the Waikeria site.
Then we are told:
Under questioning from RNZ, Mitchell confirmed of the 810 new beds, 100 of them were already budgeted for by the last government for mental health and addiction services, and another 500 were general prison beds.
He told RNZ, “we will be delivering 610 in May”. When RNZ asked if there were an additional 200 to come, Mitchell responded yes.
Luxon continued to reiterate it was an “810 bed extension” but did not provide detail about whether that was on top of the 600 the last government budgeted, or explain his answer being at odds with his minister’s answers.
Shortly after the conference ended, a correction was sent out – saying the new beds would actually come on top of those 600 already under construction.
Asked how much the extra 200 beds would cost, the corrections minister said it was “commercially sensitive” so they could not answer that, and while he did not want there to be any double-bunking as part of the new prison, he said he could not rule it out.
There were conflicting comments, too, about what the money was being allocated to.
Luxon told reporters the $1.9b injection over four years was made up of $442m in savings and $1.5b in new money.
He went on to say that the new funding was all “operating allowance” – that is, new money for new policy initiatives or cost increases – and not capital funding.
Mitchell then clarified the $1.9b did include capital funding.
Clare Lombardelli, who headed the 144-page OECD study of the New Zealand economy, perhaps might be wondering if the report could do with some rewriting to bring Luxon and Mitchell’s fiscal confusion into considerations.
She told journalists the Government should set spending and tax policies to gradually reduce the fiscal deficit and reach a budget balance.
This would support monetary policy, allowing interest rates to fall sooner than they otherwise would be able to, she said.
“On the revenue side, any tax cuts should be fully funded by offsetting revenue or spending measures.”
Moreover, looking to the future, the OECD survey says a capital gains tax will be needed to help finance an ageing population’s superannuation and health needs.
But hey – we elected a government that promised to cut taxes (although we perhaps did not appreciate the parlous state of the government’s books).
And so – as Richard Harman reports on Politik:
… Finance Minister Nicola Willis, who joined Lombardelli at her press conference, immediately rejected both recommendations.
Adherence to the tax cuts, regardless of their fiscal consequences and opposition to a capital gains tax, are political bottom lines for the Luxon government.
“We promised New Zealanders cost of living tax relief, and we will deliver it,” she said.
“We will also deliver on what this survey suggests is necessary, which is gradually reducing that fiscal deficit in a way that is sustainable.”
That’s our girl…
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton
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